World Economy

Turkey Growth Forecast at 3%

Turkey Growth Forecast at 3%Turkey Growth Forecast at 3%

The European Bank for Reconstruction and Development forecast growth for Turkey at 3% in 2015, in a report released on Thursday.

EBRD expects the Turkish economy to grow 3% in 2015 and 2.8% in 2016, below the country’s long-term potential, according to its latest forecast Regional Economic Prospects, published Friday, BGN News reported.

The report cited weaker domestic demand in 2016, amid rising costs of funding due to moderating global liquidity, may be partly offset by an improvement in exports,” the report said.

But recovery in the Eurozone should support exports, while weaker domestic demand and lower commodity prices reduce import bills, the report said.

Worsening investor sentiment towards emerging markets may also affect the Turkish economy. In mitigation, the banking sector remains well-capitalized with low non-performing loan ratios and public finances stay stable.

In general, the outlook for economies where the EBRD invests remains split, with countries further to the east weighed down by the Russian recession and weak oil and other commodity prices, the report said.

“We may be looking now for something of an upturn for emerging markets in 2016 after five consecutive years of slowdown,” Hans Peter Lankes, the EBRD’s acting chief economist, said, “But there are significant risks on the downside.”

The report also said that the refugee crisis that intensified sharply in 2015 is affecting the economies of a number of countries.

“Among frontline countries, Turkey is estimated to be hosting more than two million refugees, while in Jordan they account for almost one-fifth of the population. This massive influx has in some cases strained public services, government finances and labor markets,” said the EBRD.

 Economic Reforms

Turkey’s general election on Nov. 1 has resulted in a more stable and predictable political environment for the implementation of economic reforms, credit rating agency Moody’s Vice President Alpona Banerji said on Wednesday.

Speaking at the Ninth Turkey Annual Credit Risks Conference, Banerji said that the victory for the Justice and Development Party, which can now govern on its own, largely reduced political uncertainty, and paved the way for structural reforms for the labor market and investment arena.

Banerji explained that all emerging economies, including Turkey, which have been rated at “Baa” by Moody’s, are exposed to risks due to rapid movements of capital.

Turkey looks more fragile than other countries in regard to capital flight, due to its large amount of debt in major currencies of which short-term debt constituted a major share, he said.

While the slowdown in China is affecting most emerging markets, Turkey is less exposed as Turkey’s trade with China is limited, Banerji pointed out.

Moody’s is scheduled to review Turkey’s credit rating on Dec. 4, Banerji said that the agency does not necessarily follow the calendar, and may make an announcement at a different time.